Alpha Bank SA, Greece?s third- largest lender, will acquire EFG Eurobank Ergasias SA to create the nation?s biggest lender as the firms seek to ride out a deepening recession and the country?s sovereign debt crisis.
Alpha will offer Eurobank shareholders five new shares for each seven they hold, or 0.714 Alpha shares for each Eurobank share, according to a statement from the banks in Athens today. Alpha Bank shareholders will own 57.5 percent of the new group, and Eurobank stakeholders 42.5 percent.
The combined bank will implement a 3.9 billion-euro ($5.7 billion) effort to strengthen its finances, including a 1.25 billion-euro rights offer, a 500 million-euro convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd. and 2.1 billion euros of internal measures, the statement said. That will help give the lender a core Tier 1 capital ratio of 14 percent, even after accounting for writedowns of Greek government bonds, the companies said.
?This merger is a decisive step in the strengthening of the private sector economy at a crucial juncture in Greece?s history, demonstrating the ongoing support of leading international investors,? said Yannis Costopoulos, the chairman of Alpha Bank. ?I am delighted to welcome Paramount?s increased participation in the enlarged bank.?
The alliance between the two lenders will create a bank with assets of 146 billion euros and 1,300 branches across eight countries. It will be among the top three banks in Romania, Serbia, Bulgaria and Cyprus. Qatar investors, who already have a stake in Alpha, will be one of the main three shareholders, according to the statement.
Alpha Bank rose 30 percent and EFG Eurobank 29 percent on the Athens exchange, while competitors also surged. National Bank of Greece SA, the country?s biggest bank, jumped as much as 30 percent, and Piraeus Bank SA advanced as much as 29 percent. Greek stocks rallied, with the ASE General Index heading for its steepest gain in more than 20 years.
?A merger between any of the major Greek banks and a concurrent capital injection would be welcomed by the market, regulators and policy makers,? said Alexander Kyrtsis, a senior banking analyst at UBS AG in London, before the announcement. ?Capital is scarce and a deal could enable the banks to access the market and private investors.?